How to value an accounting practice: key drivers and multiples

Accounting practices in Australia are most often valued using a multiple of maintainable earnings (EBIT or EBITDA) — with goodwill making up 70–90% of the total value.

1. The Core Method: Earnings Multiple

Example:
EBITDA $500,000 × 4x multiple = $2.0 million value

Practice Type	EBITDA Multiple
Small suburban (1–2 partners)	2.0x – 3.0x
Medium-sized (advisory mix)	3.0x – 4.0x
Large, scalable, corporate-ready	4.0x – 6.0x+

Multiples depend on:

• Recurring revenue vs one-off work
• Client base quality & diversification
• Reliance on principals
• Staff retention & capability
• Technology, systems & scalability
• Advisory revenue proportion

2. Cross-Checks & Alternatives

Other methods are used mainly for reference:

• Rule of Thumb: 60–100% of annual fees (basic check only)
• Net Asset Value: For unprofitable or distressed firms
• DCF: For large, multi-partner, or growth-focused practices

3. Goodwill & Advisory Impact

Goodwill — brand, client list, staff, systems — drives most of the value.
Firms earning 20–40% of fees from advisory often achieve premium multiples due to stronger margins and retention.

Benchmark insight:
Top 20% firms with advisory services and scalable systems trade at 4–6x EBITDA or higher.

4. How to Lift Your Valuation

• Build recurring revenue with fixed-fee or packaged services
• Delegate clients to reduce owner dependency
• Benchmark profitability and wages against Top 20% firms
• Move to value-based pricing
• Invest in automation and cloud systems
• Document systems and succession plans

5. The Market Trend

Private equity and consolidators are targeting scalable firms with $3M+ in annual fees and strong advisory divisions.
Smaller firms can also command higher multiples through recurring revenue, systemisation, and consistent profitability.

Final Insight

Your valuation reflects transferable profit and systems, not just turnover.
Benchmarking against the Top 20% of practices helps identify gaps and boost value before sale or succession.